Chelsea Therapeutics International, Ltd. ( CHTP - Snapshot Report ) recently suffered a setback when the US Food and Drug Administration (FDA), in a written statement, informed the company that it has to conduct a new trial with its candidate, Northera (droxidopa), before it can be considered for approval.

The US agency was of the opinion that data from the existing study (306B) was inadequate for approval. The news has negatively impacted the company’s stock price.

Chelsea Therapeutics is looking to get Northera approved for treating symptomatic neurogenic orthostatic hypotension (neurogenic OH) in patients suffering from Parkinson's disease, multiple system atrophy, pure autonomic failure, dopamine beta hydroxylase deficiency and non-diabetic autonomic neuropathy. Neurogenic OH refers to a chronic neurogenic disorder that causes lightheadedness, dizziness, blurred vision, fainting etc.

We remind investors that Chelsea Therapeutics received a complete response letter (CRL) from the FDA in March 2012 declining to approve Northera on the basis of the submitted data. Chelsea Therapeutics had submitted the new drug application (NDA) seeking FDA approval of Northera for the above indication in September 2011.

The FDA asked for additional data while issuing the CRL. Following the receipt of the CRL, Chelsea Therapeutics met with the FDA in May 2012.

The latest advice from the FDA asking for an additional trial on Northera would push up the research & development (R&D) costs at Chelsea Therapeutics. Chelsea Therapeutics is currently evaluating various options to resubmit the NDA on Northera. Northera would be the first marketed product at Chelsea Therapeutics, if the FDA ultimately approves it.

Apart from Northera, the pipeline at Chelsea Therapeutics includes candidates such as CH-4051 and CH-1504, which are being developed primarily to treat patients suffering from rheumatoid arthritis (RA). The candidates, on approval, would have to compete with big players such as Abbott Labs ( ABT - Analyst Report ) , Johnson & Johnson ( JNJ - Analyst Report ) and Bristol-Myers Squibb ( BMY - Analyst Report ) among others in the RA space.

Our Recommendation

We currently have a Neutral recommendation on Chelsea Therapeutics in the long-run. The company carries a Zacks #3 Rank (Hold rating) in the short-run.